It’s rare that bank deposit rates decline the same week that U.S. mortgage rates are on the rise – but that’s what happened this week.
The drop in certificate of deposit rates, in particular, was a sharp one. As measured by the BankingMyWay Weekly CD Rate tracker, the 12 month CD rate fell from 0.561% to 0.532%.
Further up the duration scale, the 60 month CD fell from 1.612% to 1.573%, a precipitous decline of 39 basis points.
Bank interest rates are running in a different direction than mortgage rates this week, and it’s not entirely clear why.
One school of thought on higher mortgage rates is that the financial markets are anticipating a new round of inflation. That mindset was amplified by the Commerce Department’s most recent report citing a rise in retail sales of 1.2% for the month of October.
But on Tuesday the Labor Department said that the core Producer Price Index (which doesn’t count food or energy costs) was down 0.6% for October – its largest decline in four years. Most economists had expected the PPI number to rise by 0.1% (as it did in September).
So while consumers are out there in the malls and outlet stores spending more money, the price of goods in the U.S., outside of grocery stores and gas pumps, went down in October. The uptick in spending suggests the economy is getting better: Consumers don’t spend unless they’re confident things are improving on the financial front. But falling producer prices suggest the opposite - that the economy remains stagnant.